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In-app ad revenue fueling the global ‘App’onomy

In 2014, India saw the highest growth globally for app downloads and is ranked third on Google Play. Needless to say, if you’re looking to satiate this growing hunger for apps, you need to look towards emerging markets.

This explosive growth in app downloads can surely be attributed to the growing adoption of smartphones in these markets. However, even if you get smartphone users in emerging markets to download apps, you will not be able to monetize from these apps. With the lack of a strong payment ecosystem and lower credit card penetration, smartphone users in these markets prefer to download free apps.

However, ironically it is these emerging markets that are today driving the global mobile ‘apponomy’. How is this happening? The answer is: in-app advertising.

According to a recent joint study by App Annie and IDC titled ‘Mobile App Advertising and Monetization Trends 2013-2018’, in-app advertising (banner ads, video ads, etc.) and freemium (free download with in-app purchases) drove a major share of mobile app revenue between 2013 to 2014. Much of this revenue came from countries such as Brazil, Canada, France, Germany, India, Japan, Russia, South Korea, UK and US, between 2013 to 2014.

While in-app ad revenues witnessed a 71% increase in 2014 over 2013, freemium saw a 72% rise in revenues. As opposed to this, paid (paid download with no in-app purchases) and paidmium (paid download with in-app purchases) saw a 19% and 24% drop in revenues respectively. (Refer to graph: Indexed Mobile App Revenue)

Developers are increasingly preferring to go with in-app advertising because the app can be offered to smartphone users for free. However, the developer can still make money from the app as in-app advertising ensures a continuous revenue stream.

We know that emerging markets are driving much of this in-app advertising revenue. However, it is the sheer magnitude of the revenue from in-app advertising vis-à-vis paid apps in these markets that should come as a surprise.

For instance, mobile app revenue from India in 2014 almost doubled that in 2013. However, over 70% of this app revenue came from in-app advertising. In comparison, in-app ads contributed to less than 20% of the mobile app revenue in countries such as Japan.

It is also estimated that in-app advertising revenue will pass each type of PC and mobile web-based ad revenue by 2018. If publishers want to ride this swelling mobile app revenue wave in emerging markets, in-app advertising is the way to go.